- Hargreaves Lansdown shares fell by over 7% on Thursday
Interest on investor cash helped investing platform Hargreaves Lansdown boost its profits slightly beyond forecasts in the final six months of 2023.
The FTSE 250 group, which exited the FTSE 100 last year, saw its underlying pre-tax profit climb 5 per cent to £221.5million, beating expectations of £213million, as revenues grew 5 per cent to £368.2million.
Assets under administration increased to £142.2billion, up 12 per cent from the same point a year ago.
But, the picture was not all rosy. Net new business, asset retention and client retention fell, sending the firm’s share price lower on Thursday.
Mission: Dan Olley, the boss of Hargrevaes Lansdown, wants to ramp up the group’s growth
Hargreaves said ‘sustained levels of higher interest rates’ helped lift its bottom line.
The group made £132.8million from interest on cash during the half, with a net interest margin of 216 basis points versus expectations of around 200bps.
This is up from £121.6million over the same period the prior year, when the group achieved a NIM of 168bps.
It comes amid increased scrutiny from the City regulator on investment platform’s profiting from investor cash.
Hargreaves Lansdown, AJ Bell and Abrdn saw a collective £458million wiped off their value in December after the Financial Conduct Authority (FCA) launched a crackdown on unfair charges.
According to the FCA, most of the firms are keeping some of the interest for themselves while also charging customers a fee to hold the cash, in a practice known as ‘double dipping’.
All eyes on new boss Olley’s transformation plan
But, the group’s client retention rate was 91.6 per cent by the end of the period, down from 92.4 per cent by the end of its first half. Asset retention fell to 89.2 per cent, down from 91.4 per cent by the end of the previous half.
Net new business fell around 38 per cent to £1billion. The firm’s operating costs rose to £24.7million, up from £23.4million by the end of the previous half.
Hargreaves shares were down 7.72 per cent or 62.20p to 743.20p on Thursday afternoon, having fallen over 14 per cent in the last year.
New boss Dan Olley said: ‘Outflows were highest in the products that our clients use for more transient saving and investing, such as our Fund and Share Account, driven by cash withdrawals to deal with cost-of-living issues and/or to pay down debts.’
He added: ‘It is now six months since I took over as CEO and it is clear that the business is built on strong foundations; a proud heritage, with a trusted brand and knowledgeable, client-focused colleagues.
‘What is also clear is the work to be done to capitalise on those foundations to reposition HL to take advantage of the structural growth opportunities ahead.’
Among other plans, Olley wants to ramp up growth and reinvest money to ensure Hargreaves becomes a leaner business.
The period saw an upturn in transfers to banks and building societies to ‘take advantage of Cash ISA products’, Hargreaves said.
Looking ahead, Hargreaves said it would aim for ordinary dividend growth within its guidance, at around 4 per cent.
Analysts at UBS said: ‘Hargreaves Lansdown has one of the lowest (most negative) crowding scores in UBS coverage universe.
‘Results today were modestly ahead of expectations at the PBT level but we see commentary on cash trends and continued fund flow challenges (and decline in client retention rates) as likely disappointing.
‘It is clear to us that new CEO Dan Olley is taking control of a transformation plan and so much will depend on the success of this implementation in coming periods.’
